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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 8PEA
Textbook Problem
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Earnings per share

Financial statement data for the years ended December 31 for Dovetail Corporation follow:

Chapter 13, Problem 8PEA, Earnings per share Financial statement data for the years ended December 31 for Dovetail Corporation

  1. a. Determine the earnings per share for 20Y3 and 20Y2.
  2. b. Does the change in the earnings per share from 20Y2 to 20Y3 indicate a favorable or unfavorable trend?

(a)

To determine

Calculate the earnings per share of Corporation D for the year ended December 31, 20Y3 and 20Y2.

Explanation of Solution

Earnings per share: Earnings per share represent the amount of income earned per share of outstanding common stock in a period. This ratio is used for analyzing the profitability of company’s stockholders’.

The following formula can be used to calculate earnings per share:

Earnings per shareNet income(loss) – Preferred dividendsAverage number of common shares outstanding

Determine the earnings per share of Corporation D for the year ended December 31, 20Y3 and 20Y2.

Earnings per share forthe year ended 20Y3}Net income – Preferred dividendsAverage number of common shares outstanding=$448,750 –$40,00075,000 shares=$408,75075,000 shares$5

(b)

To determine

Identify whether the change in the earnings per share of Corporation D from 20Y2 to 20Y3 indicates a favorable or unfavorable trend.

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Chapter 13 Solutions

Financial Accounting
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